Medifast, Inc. MED has seen its shares dive 28.2% in the past six months compared with the industry’s decline of 9.4%. The company has also underperformed the broader Zacks Consumer Staples sector’s dip of 2% and the S&P 500’s decline of 7%. Closing the trading session at $12.92 yesterday, the stock hovers close to its 52-week low of $12.30 reached on April 7.
MED Stock's Price Performance
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This significant decline in Medifast stock price can be attributed to several factors that have weighed on its performance.
Factors Affecting MED’s Performance
Medifast is grappling with mounting challenges amid a rapidly evolving weight loss landscape. In the fourth quarter of 2024, revenues reached $119 million, landing at the upper end of the company's guidance range but still marking a steep 37.7% decline year over year. The drop was primarily due to a sharp reduction in the number of active earning OPTAVIA coaches and continued softness in coach productivity.
Customer acquisition continues to face pressure, largely due to the rising adoption of GLP-1 medications, which are reshaping consumer preferences in the weight loss space. The company ended the fourth quarter with a coach base down more than 34% from the prior year’s level. Average revenue per coach also declined by more than 5%. These declines reflect a loss of momentum and growing difficulty in sustaining the company’s direct-selling model in today’s market.
At the same time, rising SG&A expenses are putting substantial pressure on profitability in the fourth quarter of 2024. A significant increase in company-led marketing efforts, coupled with reduced efficiency in leveraging fixed costs, has led to a notable spike in expenses as a percentage of revenues. As a result, the company’s operating income has deteriorated sharply, and margins have compressed considerably, reflecting the escalating cost of maintaining its business amid declining revenues.
In its last earnings call, Medifast highlighted that it anticipates continued challenges in customer acquisition, which are expected to weigh on performance through at least the first half of 2025. Revenues for the first quarter of 2025 are projected to fall in the range of $100 million to $120 million, reflecting ongoing headwinds in the business. Management has already warned that these efforts could weigh on near-term profitability, with guidance for the first quarter ranging from a loss of 50 cents per share to breakeven.
MED’s Consensus Estimates Showing Downtrend
Reflecting the negative sentiment around MED, the Zacks Consensus Estimate for the fiscal 2025 and 2026 bottom line has seen downward revisions. Over the past 30 days, the consensus estimate has declined by 7 cents to a loss of 1 cent for the current fiscal. For the next fiscal, the consensus estimate declined by 16 cents to earnings of 2 cents. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
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Can Growth Strategies Turn the Tide for MED?
Despite challenges, Medifast is strategically positioning itself to thrive in the rapidly evolving weight loss market, particularly as the adoption of GLP-1 medications reshapes industry dynamics. With the launch of OPTAVIA ASCEND in early 2025, Medifast is positioning itself to meet the unique nutritional needs of GLP-1 users. The company's holistic approach, integrating customers, coaches and clinicians through LifeMD, uniquely positions it to support GLP-1 users in achieving their long-term health goals.
To capitalize on this shift, Medifast is enhancing its product offerings, expanding customer acquisition channels and elevating the customer experience. The company is investing significantly in marketing to drive brand awareness and customer acquisition. It is testing new growth channels through its collaboration with LifeMD, targeting audiences interested in GLP-1 medications and those seeking lifestyle support beyond medication.
Medifast is actively pursuing a long-term growth strategy centered on innovation, market expansion and operational excellence. Key initiatives include enhancing product and program offerings, entering new markets, improving the coach and client experience and leveraging data for smarter decision-making. The company’s coach-led model, which blends lifestyle guidance with science-backed products, remains a central pillar in attracting and retaining clients.
Management is making strong progress with the "Fuel for the Future" program, aimed at optimizing expenditures and freeing up capital for growth initiatives while improving profit margins. In 2024, the program delivered $21 million in cost savings, with expectations of an additional $15 million to $20 million in savings in 2025. Looking ahead, the company's primary focus will be on accelerating customer acquisition through both company-led marketing efforts and enhanced coach-driven strategies to attract new customers and reactivate those who have stopped participating.
The Best Move on MED Stock
Medifast is contending with short-term challenges stemming from rising costs, revenue declines and rising competition from GLP-1 medications. These factors have weighed on the stock’s performance, which has lagged behind the industry and is currently trading near its 52-week low, reflecting ongoing weakness.
Despite these headwinds, the company’s strategic initiatives, product innovation, market expansion and a renewed focus on customer acquisition have fueled long-term recovery. Given the current outlook, existing investors may consider holding their positions in MED stock, while potential investors might wait for a better entry point. Medifast currently carries a Zacks Rank #3 (Hold), indicating a balanced risk-reward scenario.
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